How Intel Gets Social Responsibility Just Right

Intel co-founder Andy Grove once noted that some of his fundamental views on running a business were based on reading Peter Drucker’s foundational work, The Practice of Management, 30 or so years after its publication in 1954.

The experience, Grove said, illustrated “how long some of the principles . . . last and retain their appropriateness, even as things change.”

Another 30 years down the road, whether they know it or not, the folks at Intel are living out what Drucker prescribed on those very same pages—especially in the book’s concluding chapter, “The Responsibilities of Management.”

Last week, at the Consumer Electronics Show in Las Vegas, Intel Chief Executive Brian Krzanich announced that Intel was the first company to reach a significant milestone: It is now manufacturing and shipping only “conflict-free” microprocessors—that is, computer chips devoid of minerals that come from those mines that pass their profits on to warlords in the Democratic Republic of the Congo and other violence-ravaged parts of Africa.

Armed groups, which reap more than $100 million a year from the mineral trade in eastern Congo, regularly slaughter innocents as they jockey to control the region’s most valuable mines and transportation routes. Meanwhile, the minerals being illegally extracted—coltan, tin, tungsten and gold—wind up in a host of name-brand electronic products.

“The minerals are important, but not as important as the lives of the people who work to get them,” Krzanich said.

At a most basic level, Intel’s initiative is a reminder that businesses do not exist in a vacuum and that many of their everyday decisions ripple far out into the world—a notion that Drucker spelled out in The Practice of Management, long before the term “social responsibility” first came into fashion.

“What is most important is that management realize that it must consider the impact of every business policy and business action upon society,” he wrote. “It has to consider whether the action is likely to promote the public good, to advance the basic beliefs of our society, to contribute to its stability, strength and harmony.”

Lest there be any question as to what he was driving at, Drucker reinforced this idea in his 1973 book Management: Tasks, Responsibilities, Practices: “One is responsible for one’s impacts whether they are intended or not,” he asserted. “The social impacts of the organization are management’s business.”

Drucker added that management has a particular responsibility “whenever its special competence gives it authority” to act.

Such was certainly the case here. Intel—and Intel alone—possesses the knowledge to manage its supply chain in a manner that promises to eliminate the company’s use of conflict minerals.

Even then, it was “a significant challenge for us,” Carolyn Duran, who helps direct Intel’s global sourcing and procurement, told NPR’s “All Things Considered.” Indeed, it took several years for the company to figure out how to trace what is mined in the Congo to a series of smelters and then verify the provenance of the various minerals through third-party audits and on-site visits. Already, she said, Intel has seen smelters “changing their behavior” because of the pressure.

Some observers have dismissed Intel’s efforts. They point out that Krzanich and his team have been motivated, at least in part, by a 2010 law that requires companies to publicly disclose whether their products contain conflict minerals.

“The new U.S. law doesn’t restrict any sort of trade,” the web magazine Engadget remarked when the measure first came out. “It does, however, allow companies that don’t use bloody rocks to label their products ‘conflict-free,’ so we’re sure astute marketing gurus are developing plenty of new all-plastic gizmos even as we speak. For the children, of course.” Another report suggested that Intel and other companies aren’t “too keen on the bad PR” that might stem from their electronics being branded full of conflict minerals.

But so what? If customers care about this issue—and I sure hope they do—then what is wrong with trying to give them what they value in this regard? What’s the problem with using “conflict free” as a marketing advantage?

“The ideal approach,” Drucker declared, “is to make the elimination of impacts into a profitable business opportunity.”

Duran leaves no doubt that Intel is, in fact, aiming to do just that. “It will be up to the public and ultimately consumers to determine and highlight those that are doing the right thing and those that are choosing to turn away,” she said.

After all, many companies have failed to respond as aggressively as Intel has. A 2012 report by the Enough Project, which is working to end the atrocities in Sudan, eastern Congo and elsewhere, singled out Intel, HP, Motorola Solutions and Apple for being “pioneers of progress” on conflict minerals. It put Nintendo, HTC, Sharp, Nikon and Canon at the bottom of the industry list.

Intel’s latest step—though neither foolproof nor a panacea—marks a “huge breakthrough,” said Sasha Lezhnev, an Enough Project senior policy analyst. “It really does help move the supply chain from being opaque and turning a blind-eye on its sourcing to being more transparent.”

If Intel attracts customers as a result, that should be a cause for celebration, not cynicism.

Clarification: Although the Enough Project’s 2012 report on conflict minerals praised four “pioneers of progress”—Intel, HP, Motorola Solutions and Apple—it also included a different list, which showed that another set of companies had made the most real headway on the issue. At the top were Intel, HP, SanDisk and Philips.

Rick Wartzman is the executive director of the Drucker Institute, a social enterprise at Claremont Graduate University, whose mission is strengthening organizations to strengthen society. He is the author or editor of five books and for 20 years was a reporter, editor and columnist at The Wall Street Journal and Los Angeles Times.